New York Enacts State WARN Act: Covers More Employers and Contains Longer Notice Periods than the Federal WARN Act

August 28, 2008

On February 1, 2009, New York will join a handful of other states which have enacted state plant closing laws that are more stringent than the federal Worker Adjustment and Retraining Notification (“WARN”) Act. The federal WARN Act, enacted in 1989, requires that covered employers give affected employees at least 60-days’ notice of a plant closing or mass layoff. In addition to covering more employers, the New York statute also requires that employers provide longer advance notice to affected employees when a triggering event occurs.

Employers Covered by New York’s WARN Act

The New York WARN Act (“NY WARN Act”) applies to “any business enterprise that employs fifty or more employees, excluding part-time employees, or, fifty or more employees, including part-time employees, that work in the aggregate at least two thousand hours per week.” NY WARN §860-a(3). This provision results in substantially broader coverage than the federal law, which covers employers with 100 or more employees, excluding part-time employees, or 100 or more employees, including part-time employees, who work an aggregate of at least four thousand hours per week (exclusive of overtime hours). 29 U.S.C. §2101(a)(1)(A) and (B). Thus, employers who were not previously covered by the federal law may now be covered by the NY WARN Act.

In order to determine coverage under these provisions, an employer must distinguish between full-time and part-time employees. The definition of part-time employee under the NY WARN Act is similar to that in the federal law: “an employee who is employed for an average of fewer than twenty hours per week or who has been employed for fewer than six of the twelve months preceding the date on which notice is required.” NY WARN §860-a(5).

However, the determination whether an employee has been employed for “fewer than six of the twelve months” preceding the required notice date may differ under the two laws. The minimum notice period required under the NY WARN Act is 90 days, while the notice period under the federal law is only 60 days. As a result of the different notice periods, and because the definition of a part-time employee includes an employee who has worked for fewer than six of the twelve months preceding the required notice date, the same employee can be considered full-time under the federal law but part-time under the state law. For example, an employee who was hired between eight and nine months prior to the employment loss would be considered a part-time employee under the NY WARN Act, but would be considered a full-time employee under the federal law. Thus, New York employers should be aware that, in order to determine whether they are covered, they will need to evaluate each employee under two different standards to determine who is a part-time employee.

If the employer does not employ at least 50 full-time employees, but employs at least fifty 50 full- and part-time workers combined, the next step in determining coverage under the NY WARN Act is to calculate the total number of hours worked. The employer is covered if the full- and part-time employees work an aggregate of 2000 hours per week. (The corresponding standard under the federal law is 4000 hours). Notably, while the federal law excludes overtime hours from the calculation of aggregate hours worked, the NY WARN Act requires that the employer include overtime hours worked in that calculation. The requirement to include overtime hours may cause some difficulty in practice because most employers do not record the number of overtime hours worked by exempt employees.

Department of Labor regulations under the federal law provide that the calculation of hours is based on the work week prior to the date on which the notice would be required, unless that week is not “representative” of the workforce, in which case an earlier measuring period is permitted. 20 C.F.R. §639.5(a)(2). It is anticipated that regulations to be promulgated under the NY WARN Act will contain a similar provision.

Definition of Mass Layoffs, Plant Closings and Relocations

Mass Layoff

A “mass layoff,” as defined by the NY WARN Act, is substantially similar to the concept of mass layoff under the federal law, except that it is triggered when substantially fewer employees are affected. Under the NY WARN Act, a “mass layoff” occurs: (i) when at least 33% of the employees (excluding part-time employees) and at least 25 employees (excluding part-time employees) are laid off (the corresponding number under the federal law is 50 employees); or (ii) when 250 employees (excluding part-time employees), regardless of the percentage of the workforce, are laid off (the corresponding number under the federal law is 500). Because the thresholds for a mass layoff under the NY WARN Act are lower than those under federal law, more layoffs will be covered by the state law than under the federal law. In addition, as discussed above, because the notice periods under the NY WARN Act and federal law are different, the determination as to whether a mass layoff has taken place, based on the number of full-time employees terminated, may be different under the two statutes.

Plant Closing

The definition of a “plant closing” under the NY WARN Act parallels that under the federal law but, like the definition of mass layoff, is triggered when far fewer employees are affected. Under the New York statute, a “plant closing” is defined as the “permanent or temporary shutdown of a single site of employment” which results in an employment loss during any 30-day period for 25 or more full-time employees. NY WARN §860-a(6). The corresponding threshold under the federal law is 50 full-time employees. And again, because the notice periods are different under the state and federal laws, different calculations will need to be made to determine whether the number of full-time employees affected rises to the level of a “plant closing” under either law.

Relocation

The NY WARN Act also provides that a covered employer must provide 90 days notice of “relocation,” a concept that is not found in the federal law. The New York statute defines “relocation” as “the removal of all or substantially all of the industrial or commercial operations of an employer to a different location fifty miles or more away.” NY WARN §860-a(8).

Both the federal law and the NY WARN Act calculate employment losses over a thirty day period, and, in addition, two or more groups of employment losses over a 90-day period will usually be combined to trigger the notice threshold.

What Triggers the Notice, When Should it be Sent and Who Should Receive It?

Under the NY WARN Act, notice of a covered event must be sent to affected employees, any union which represents them, and the governmental offices specified in the statute: the “department” (presumably the state Department of Labor) and the local Workforce Investment Board (established pursuant to the federal Workforce Investment Act). These notices are separate and apart from those required to be sent to government recipients under the federal law: the highest ranking local government official and the state Dislocated Worker Unit. Unlike the federal law, moreover, a New York employer is required to send notices to both the affected employees and any union which represents them, not just the union. The content of the notice is the same as what is required by the federal law. NY WARN §860-b(2).

Oddly, although the NY WARN Act, as discussed above, includes a definition of “plant closing,” the key provision of the law, which requires an employer to provide notice of certain employment losses, does not include “plant closing” as one of the triggering events. Section 806-b(1) provides that “[a]n employer may not order a mass layoff, relocation, or employment loss” unless 90 days’ notice is provided to affected employees. It is almost certain that this was a drafting error, and that the legislature intended to require advance notice in the event of a “plant closing,” not every “employment loss.” Accordingly, it is anticipated that there will be some technical revisions before the statute goes into effect.

Reduction in Notice Periods

Like the federal law, the NY WARN Act provides for certain exceptions to the 90-day notice requirement. Unfortunately, because of imprecise drafting, it is unclear whether these exceptions are applicable to mass layoffs.

Specifically, NY WARN Act §860-c provides that the 90-day notice requirement may be reduced in these circumstances:

A faltering company was actively seeking capital or business at the time the notice should have been given and the notice would have precluded the employer from obtaining the needed capital or business;

The events giving rise to the plant closing or mass layoff were “not reasonably foreseeable at the time the notice would have been required”;

A temporary project ends;

The terminations are the result of natural disasters or strikes or lockouts.

Curiously, while some of these exceptions mention both plant closings and mass layoffs, the introductory paragraph to §860-c provides that “[i]n the case of a plant closing, an employer is not required to comply with the notice requirement,” and then goes on to list the exceptions set forth above. Because “mass layoff” was omitted from the introductory paragraph of section 860-c, it is unclear whether an employer can take advantage of one of these exceptions in the case of a mass layoff. It is likely that this is another drafting error that will be corrected.

Damages

Under the NY WARN Act, as under the federal law, an employer who fails to provide the required ninety days’ notice can be liable for a civil penalty of $500 per day and backpay for the period of time that notice should have been given to the affected employees. The statute also provides that the total amount of penalties for which an employer may be liable under the NY WARN Act “shall not exceed the maximum amount of penalties for which the employer may be liable under federal law for the same violation.” NY WARN §860-h(2). Thus, an employer who fails to comply with both statutes would be liable for a penalty no greater than $30,000 ($500 per day times the 60 days’ notice required under the federal law).

If you have any questions about the NY WARN Act, please contact any of the attorneys in our New York office. As noted above, there are several drafting issues that will hopefully be corrected either through technical amendments, or Department of Labor regulations, prior to the effective date of February 1, 2009. As the effective date approaches, KM&M will provide you with any updates, amendments or corrections to this important new statute.